Monday, January 21, 2013

Commercial Lease Savings From Modified Gross vs NNN

Looking at ads and web sites lease rates can be confusing. There is triple net lease rates (commonly written as NNN) down to gross lease rate. In a NNN lease the tenant pays a lower base rent to the landlord and then all additional expenses such as Property Taxes, Property Insurance, Water/Sewer, Storm Water, Trash, Common Area Maintenance, and perhaps even Electric, and Gas separately. In a gross lease rate all operating expenses are included in the monthly rental payments. In the middle of the spectrum is a modified gross which includes some but not all operating expenses.  
Note: Phone and internet get added to the mix only occasionally but usually only for small executive style office spaces.

There are pros and cons:
1.       Gross Lease Rate- Great for when you need to know exactly what their monthly costs will be for the term of the lease. This may seem an advantage but sometimes a landlord will inflate the rental rate to cover the variable utility charges. Consequently, you may pay for something you did not use.
2.      Modified Gross Rate- These terms required landlord and tenant to be very clear about what is included and what is not.A modified gross rate is a great low risk option. The tenant only pays for the utilities that they consume. This is how we structure our leases. Tenant only has to add electric, gas, phone, internet and security. These are costs controllable by a tenant because they are based on use and consumption.
3.      Triple Net (NNN) Lease Rate- NNN lease rates can be deceivingly attractive to potential renters because of the low monthly payment on the base lease.  The danger, however, lays in the assessments that tenants have to pay to cover operating expenses of the building. Fees can add substantially to base rent amount.

Below is the savings, based on 2012 costs for our tenants in 2T Park on the four most popular sized units.


Unit Size               Yearly Savings           Monthly Savings

1,500 SF Unit       $1,498.00                   $124.80

1,750 SF Unit       $1,747.50                    $145.65

3,000 SF Unit       $2,996.00                    $249.65

3,500 SF Unit       $3,495.00                    $291.25

Here are Units currently, January 21, 2013, available in 2T Park. Be sure when comparing to other spaces and places to factor in the savings of our Modified Gross Lease vs NNN offered by others.

2T Park Available Units
 $    1,095.00
 $    2,190.00
 $    2,190.00
 $    1,095.00
 $    1,875.00
 $    1,800.00
 $    1,200.00
 $    1,000.00
 $    1,900.00

Wednesday, January 16, 2013

Problems Leasing Gaston County Commercial Real Estate Solved

Traditionally leasing space for your business has involved a simple equation of most square footage for the rent dollars. Does that really solve the leasing question?

Does a low rent rate still seem a bargain when the Landlords adds fees for Property Taxes, Storm Water , Property Maintenance, Insurance on the Building, Dumpster, Water, Sewer, etc.. Very important to find out if these fees are added to the rent. This add-on lease is typically called a triple net. Basically rent is net to the Landlord and Tenant pays the expenses.  This is called “Pass through Provisions”.

Is all the square footage useable? Some leases are for floor plate which is defined as the area obtained by measuring along the exterior walls. Some leases include charges for common areas such as baths, entries, lobbies and even dock space. This is called core area or common area. The lease allows this common area (core space) to be divided by total space in a building to get a core factor. You might lease 1,000 square feet f of floor plate and have it multiplied by a core factor of 12% and rent will be based on 1,120 square feet rentable area.

Other factors in determining utility of space are shape of space, bay spacing, location of columns and ceiling heights. Is the unit open and ready for your layout or does the space have an existing layout that you must work around?

Location, location, location is about convenience for customers, clients, employees, shipping and receiving.  Do you need street frontage for walk-in sales? IS a high traffic count required to generate drop-in sales?  One of the things most overlooked in synergy. Do I have customers in common with others in the area? Are there relationships between businesses that lead to referrals?

2-T Park has 53,500 square feet of business space offered under simple no add-on fees rates. We have multiple sizes and floor plans. Give us the opportunity to solve your leasing issues in Gaston County.